Even the optimists among us would be forgiven for thinking this is all a pointless
exercise. After all, it was just a little over four years ago that President
George W. Bush announced the formation of his own commission to offer
recommendations for making the tax system fairer and simpler without
reducing revenue. At the outset Bush said he could support a flat tax
and would even consider a consumption tax. The commission was supposed
to report by July 2005. The deadline was pushed back twice. The group
finally submitted its report in October of that year. And then --
nothing.

Will anything be different this time around? Actually, chances are,
yes. For one, a major tax bill next year is virtually assured. Obama
should have this date marked in red on his calendar: Dec. 31, 2010.
After that date, the Bush tax cuts -- including the 35% top marginal
income tax rate, the 15% top rate on capital gains and dividends, and a
host of other breaks -- are supposed to be history. The current plan is
to let the cuts for the top rates expire, but keep them for
middle- and lower-income taxpayers. That will take legislation, so why
not a big overhaul bill that gives the system a badly needed shakeout? If we've learned nothing else
from watching Obama these last few weeks, we know he's willing to think
big and propose big.

But not too big. That gets to another reason why there's a decent
chance for a tax reform bill to pass: The type of "reform" being
contemplated will be more doable and less revolutionary than many past
attempts that fizzled. Usually, any tax reform effort starts with buzz
about overthrowing the current code with something much more simple
(but usually a lot more regressive) such as a flat tax or a consumption
tax.

Obama's commission won't even try for something that radical. Don't
expect anything on the scale of the Tax Reform Act of 1986, by far the
biggest overhaul we'd seen in decades. That law reduced the number of
tax rates, broadened the tax base, got rid of a lot of deductions
(remember the write-off for car loans?) and brought true reform in
other areas of the code that had gotten out of hand. But Congress has
added one break, tweak and loophole after another since then and the
tax code is nearly as Byzantine as ever.

While this time there will be some stabs at simplification -- combining
the crazy quilt of various education tax breaks into one simplified
credit, for example -- the focus of reform will be different. Expect
efforts to close tax loopholes, which means new tax regulations for
businesses; keep taxes low for folks at the bottom end of the income
scale, and for middle-incomers too; and raising taxes for those in the
upper brackets. Big changes? Definitely. An appreciably smaller tax
code? Don't bet on it.